Bill will protect small businesses

JAKARTA (JP): The bill on small businesses, when enacted, will imply responsibilities on the part of large firms to support the growth of smaller partners, Minister of Cooperatives and Small Enterprises Subiakto Tjakrawerdaya said yesterday.

"Partnership between large and smaller companies is not an obligation, but it is implied in the bill that large entities bear responsibility to nurture small businesses," Subiakto told journalists after giving explanations on the bill at a plenary session of the House of Representatives yesterday.

He stressed that the government will not offer incentives to medium-sized and large companies which help smaller ones. "It's their responsibility, anyhow. So, they don't deserve incentives for such partnership."

The long-awaited bill covers all aspects of small firms, including the partnership between large and small companies and the creation of a conducive business climate for small firms.

Subiakto said companies categorized as small firms are those with maximum total assets of Rp 200 million (US$88,200), excluding land and buildings, or those with maximum annual sales of Rp 1 billion.

The minister said the calculation of small companies' assets was based on the assessment of banks in providing loans for them.

Under the bill, banks are allowed to extend credit of up to Rp 250 million to small companies with maximum total assets of Rp 600 million and they generally provide loans with a ratio of 1:2.4 against assets. To receive a loan of Rp 100 million, for example, a company is required to book total assets of Rp 240 million.

"The small businesses defined by the bill are companies or cooperatives founded be Indonesians," Subiakto said.

He said the definition of small companies was intentionally not related to the number of their workers because the correlation between assets or sales and the number of workers varies across business sectors.

The definition of small businesses in the bill is needed to harmonize various definitions set by a number of governmental institutions. The bill's definition will also be important for banks in extending collateral-free loans as proposed by Minister of Finance Mar'ie Muhammad two weeks ago.

Mar'ie said on Aug. 22 that the government was drafting legislation to allow small businesses to obtain collateral-free loans of up to Rp 50 million.

Subiakto said yesterday that medium-sized and large companies which undervalue their assets in order to be categorized as small companies could face severe penalties, ranging from temporary suspension to permanent cancellation of their business licenses.

He noted that the bill also governs the partnership framework between large and small companies, so that the large ones will not acquire small ones illegally.

"Those breaking the rule could be fined up to Rp 500 million," Subiakto was quoted by Antara as saying. (rid)